SINGAPORE (Oct 11): Maybank Kim Eng is maintaining its “hold” call on Singapore Post (SingPost) with an unchanged price target of $1.22, pending clearer direction from the strategic review of the group’s business strategy.

This follows the launch of the new SingPost Centre mall, which doubles the group’s gross retail floor space to 269,000 sf and net lettable area (NLA) to 178,000 sf.

In a Wednesday report, analyst John Cheong projects the new SingPost Centre to bring the group an additional rental income of $22 million, which translates to about $13 million of earnings assuming a steady 90% occupancy rate.

The mall is expected to contribute $3 million of earnings for FY18 and $13 million for FY19, which constitutes 3% and 10% of total earnings in the respective financial years.

In particular, Cheong notes that SingPost Centre’s convenient location within proximity to Paya Lebar MRT interchange station has helped to bring its occupancy to a healthy rate of 80.4% upon its opening.

The analyst also believes the mall itself highlights Singpost’s embracement of how technology is changing the retail landscape, given the technology-enabled innovations the group has implemented together with the mall’s tenants.

The first all-laser Cineplex by Golden Village is one such example, says Cheong, where award-winning smart laser projectors have been installed for enhanced image quality – while NTUC FairPrice has introduced several innovations such as scan-and-go-systems to reduce the time needed for grocery runs.

Another instance is the new General Post Office (GPO), a smart post office at SingPost Centre which offers automated serves to improve operational efficiency and provide round-the-clock access to postal services, among others.

See: SingPost to invest $16 mil in island-wide Smart Post Office network

“[The mall] is set to reinvigorate Paya Lebar Central, which is rapidly transforming into a major commercial hub under the Urban Redevelopment Authority’s master plan,” says Cheong.  

Risks to the analyst’s view include worse-than-expected deterioration in SingPost’s traditional mail business before its e-commerce logistics segment compensates, as well as the group’s ifailure to extract synergies from and integrate its largest acquisition, TradeGlobal.

As at 10.24am, shares in SingPost are trading flat at $1.28, 24 times FY18 core earnings.